Home of the DGI Adventure Blog

Update: Lazy Portfolio Experiment

Earlier this year, we put my traditional IRA account, which represents about 10% of our liquid assets into a “lazy portfolio” consisting of just four ETFs. It was part experiment and part demonstration that investing isn’t really that complicated if you don’t want it to be.

Well it’s been six months to the day since I published the inception post of my “lazy portfolio experiment”, and it’s time for an update.

So here we go.

Lazy Portfolio Composition

For reference this portfolio is my traditional IRA account, which is always published live as account #2 in our liquid assets.

I think rebalancing this kind of portfolio once a year is plenty, but the funds are in an Interactive Brokers account which has low trading fees, but also charges minimum fees if there’s no trading. For this reason, I’ve elected to rebalance (or at least consider rebalancing) the lazy portfolio quarterly.

Your average nihilist passive index investor doesn’t need to do it that often, but oh well.

Here’s the current allocation picture compared to the goals (prices as of market close 12/28/17):

ETF

Asset Class

Shares

Price

Total Value

Allocation

Target

BND

Bonds (US)

106

$81.44

$8,632.64

18.46%

20%

VTI

Equities (US)

139

$137.76

$19,148.64

40.96%

40%

VXUS

Equities (exUS)

244

$56.70

$13,834.80

29.59%

30%

VNQ

Real Estate (US)

52

$82.95

$4,313.40

9.23%

10%

Cash

Cash (USD)

824.46

$1.00

$824.46

1.76%

0%

_

_

_

TOTAL

$46,753.94

100%

100%

The cash is accrued from dividends that have been paid, and the allocation percentages pretty much summarize the story of the second half of 2017. Namely equities (particularly in the US) have done better than bonds and real estate.

None of these allocation percentages are that far off their targets, so I’m not going to make too big a fuss about the rebalancing effort this quarter.

I’ll use the excess cash to buy another 10 shares of BND and that will be close enough.

Comparison

Just for funsies I’ve decided to compare the performance of this “lazy portfolio” to my actively managed inherited IRA account (account #1 in the portfolio).

Since both accounts are held at Interactive Brokers, it’s pretty easy to compare them for a specific time period. I just run a custom MTM (mark to market) summary report for their starting and ending NAVs (net asset values), and boom there you have it.

So how is the manic trader doing compared to my couch potato persona?

Account

Starting NAV (06/28)

Ending NAV (12/28)

Gain/Loss

% Return

Annualized %

Lazy Portfolio

$43,518.01

$46,692.65

$3,174.64

7.30%

14.55%

Actively Managed IRA

$203,893.75

$213,143.22

$9,249.47

4.54%

9.06%

So this is the point where I throw up my hands and give up active investing forever to become a full fledged indexing nihilist right?

Meh. Not so fast.

I maintained a pretty sizable cash position (like between 30 – 60%) in the active account for most of that period, and my bond allocation is a bit higher due to my CEF portfolio.

So it’s not apples to apples by any means, but it’s some fodder for the “passive apologists” out there. The account that I haven’t even so much as looked at more than once or twice in six months is doing nearly twice as well as the account that I manage on an almost daily basis.

So there you go.

Both accounts are actually doing pretty darn good, but let us never confuse a bull market with brains.

So what do you think? Should I stop actively managing my investments and go full boglehead?